ByLaws:

 Rules to regulate the internal affairs and/or protect the legitimate corporate interest.
 Must be consistent with law, particularly in the promotion of good corporate governance, the protection of minority
investors and the prevention of fraud and abuses on the part of the controlling stockholders, members, directors,
trustees or officers.
 A bylaw is not necessary in the forming of the corporation; AoI will suffice.
 Only has intra-corporate effect, does not binding into third persons.
 Elements: Not contrary to any law, must not contravene to the AoI

Sec. 45: Adoption of Bylaws

Codal Provisions:

 The affirmative vote of stockholders representing majority of the outstanding capital stock (for stock) or majority of
members (for non-stock) shall be necessary;
 Shall be signed by the stockholders or members (SoM) voting for them and shall be kept in principal office for
inspection of the SoM during office hours;
 The copy of bylaws duly certified by the majority of directors or trustees and countersigned by Corp. Sec. shall be filed
together with the AoI;
 Bylaws may be adopted and filed prior to the incorporation: shall be approved and signed by all the incorporators and
submitted to the SEC together with the AoI;
 Effectivity of bylaws: only upon the issuance of SEC of certification;
 If bylaws filed by Financial Institutions and special corporations: shall not accept by SEC unless accompanied by
certificate from appropriate government agency (eg. BSP)

Sec. 46: Contents of the Bylaws

Codal Provisions:

a) Time, place & manner of calling & conducting regular or special meetings of D&T;
b) Time & manner of calling and conducting regular or special meetings & mode of notifying the SoM;
c) Quorum in meetings of SoM and the manner of voting therein;
d) Modes in which SoM, D&T may attend meetings and cast their votes;
e) Form for proxies of SoM and the manner of voting them;
f) D&T’s qualifications, duties and responsibilities, guidelines for setting the compensation of DT&O, and the max
number of other board representations that an independent director or trustee may have which shall be more than
the number prescribed by the SEC;
g) Time for holding the annual election of D&T and the mode or manner of giving notice;
h) Manner of elections or appointment and term of office of all other officers other than D&T;
i) Penalties for the violation of the bylaws;
j) Stock corp.: manner of issuing stock certs;
k) Such other matters as may be necessary for the proper or convenient transaction of its corporate affairs for the
promotion of good governance and anti-graft & corruption measures. (Arbitration engaged)

Annotations:

 Changes introduced by the RCC:

o RCC provides for the legal basis for virtual attendance, participation voting through remote communication
and voting in absentia in shareholders or members meeting; Videoconferencing, teleconferencing or other
alternative modes of communication are allowed despite silence of the RCC.
o Permits corporation to send notices through electronic means.
o Secured creditors and administrators may vote the shares through proxies.
o Annual meetings of the shareholders or members may be set on any date After April 15 of every year;
o Shareholders or members meeting may be held in any city within Metro Manila, Metro Cebu or Metro Davao;
o Notice for the annual meeting must be sent at least 21 days prior to the meeting;
o Notice of regular or special meeting of D&T must be sent at least 2 days prior to the scheduled meeting;
 Quorum:
o A meeting that is inquorate has no jurisdiction to transact business and cannot even start. Such fact of the
quorum must be ensured by the Chairman and noted in the minutes.
o General rule: the bylaws may provide a greater (not lesser) quorum for the protection of minority
shareholders.
 Exceptions: (1) D&T elections requires the presence of the owners of majority of the outstanding
capital stock; (2) S0M meeting: quorum is determined as a percentage of the outstanding capital
stock or based on the prescribed members who are actual, living members with voting rights.
  Corporate Officers, Directors and Trustees:
o Only those whose positions are particularly mentioned or provided for in the bylaws and consequently
appointed by the board.
o Bylaws may provide additional qualifications or disqualifications of Directors, Trustees and Officers.
 Measures to prevent graft and corruption:
o Board’s oversight function: board should set the tone and make a stand against corrupt practices (eg.
Bribery, fraud, extortion, collusion, conflict of interest and money laundering) by adopting an anti-corruption
policy and programs in its code of conduct. It also includes the implementation of suitable framework for
whistle-blowing that allows employees to freely communication their concerns about illegal or unethical
practice.
o Personal Liability for private corruption: private corruption amounts to a breach of duty of loyalty by the
concerned DT&O (not fair and reasonable self-dealing contract) and may be held liable for damages;
o Personal Liability for public corruption: amounts to breach of duty of obedience by the concerned DT&O
making him personally liable to the corporation for resulting damages;
o Tolerating corruption: RCC imposes a fine on a DT&O who knowingly fails to sanction, report or file the
appropriate action to appropriate govt. agencies, allows or tolerates graft and corrupt practices;
o Retaliation against whistle-blowers

Sec. 47: Amendment to Bylaws

Codal Provisions:

 Who may amend, repeal or adopt new bylaws?

o Majority of the BODoT and the owners of at least majority of outstanding capital stock;
o Majority of the members for a non-stock;
o At a regular or special meeting duly called for the purpose;
 Can the power to amend, repeal or adopt new bylaws be delegated?
o Yes. By the owners of 2/3 of the outstanding capital stock or 2/3 of the members of non-stock may do so to
the BODoT
o Provided: delegation be considered as revoked if the stockholders owning majority of outstanding capital
stock or majority of members so vote at a regular or special meeting;
 Corporation shall file with the SEC such amended or new bylaws, and if applicable, the stockholders or members
resolution authorizing the delegation of power to the BODoT, duly certified by Corp Sec & majority of D&T;
 Effectivity of amended bylaws: only upon the issuance of SEC of certification;

_________________________________________________________________________________________________________________________________________________

Meetings:

 Requisites to have a valid meeting:

1. It must be held at the stated date in bylaws, appointed time or at reasonable time;
2. There must be previous notice;
3. Called by the proper person (Board, Stockholder or Member);
4. It must be held at the proper place (Principal office or not applicable, Manila, Cebu & Davao);
5. There must be a quorum. Mere referendum without a meeting is not sufficient.

Sec. 48: Kinds of Meetings

 Meetings of directors, trustees, stockholders, or member may be REGULAR OR SPECIAL.

 Regular Meetings: those set in the bylaws.
 Special Meetings: held when the exigencies of the situation so require.
 Kinds of Meetings and Subject Matters:

Subject Matters Prescribed Quorum: Board Prescribed Quorum: Prescribed Vote: Board Prescribed Vote:
SoM SoM
1. Regular Corporate Presence of Majority of n/a Majority of D&T n/a
Actions D&T present in the meeting
(or simple quorum)
2. Appointment of Presence of Majority of n/a Majority of all the n/a
Corporate Officers D&T members of the board
3. Regular Meetings of SoM n/a Presence of SoM n/a Prescribed vote on
representing at least matters requiring
majority of outstanding SoM approval
capital stock
4. Grant of compensation to n/a Presence of SoM n/a Majority of the
D&T representing at least outstanding capital
majority of outstanding stock or majority of
capital stock members
 5. Election of D&T
6. Removal of D&T
Special Corporate Matters
1. Special approval of
material, self-dealing
contracts in public interest
companies
2. Special approval of self-
dealing contracts (fair and
reasonable)
3. Amendments to the AoI
4. Denial of Pre-emptive
right
5. Adoption or amendment
of bylaws
6. Revocation and
delegation to the BODoT to
amend, repeal or adopt
new bylaws
7. Declaration of stock
dividends
8. Management contracts
n/a
n/a
Presence of at least 2/3 of
entire membership of the
board & at least majority
of ID
n/a
Presence of the majority
of members of the Board
Presence of the majority
of members of the Board
Presence of the majority
of members of the Board
n/a
Presence of the majority
of members of the Board
Presence of the majority
of members of the Board
Presence of SoM n/a Nominees receiving
representing at least the highest number
majority of outstanding of votes shall be
capital stock (only with declared elected
voting rights) or entire
membership
Presence of SoM n/a 2/3 of outstanding
representing at least capital stock or
majority of outstanding entire membership
capital stock (only with
voting rights) or entire
membership
n/a at least 2/3 of entire n/a
membership of the
board & at least
majority of ID
Presence of SoM n/a 2/3 of outstanding
representing at least capital stock or
majority of outstanding entire membership
capital stock (only with
voting rights) or entire
membership
Presence of SoM Majority of the 2/3 of outstanding
representing 2/3 of members of the board capital stock
outstanding capital (including
stock (only with voting nonvoting shares)
rights) or entire or entire
membership membership
Presence of SoM Strict majority 2/3 of outstanding
representing 2/3 of capital stock
outstanding capital (including
stock (only with voting nonvoting shares)
rights) or entire
membership
Presence of SoM Majority of the 2/3 of outstanding
representing 2/3 of members of the board capital stock
outstanding capital (including
stock (only with voting nonvoting shares)
rights) or entire or entire
membership membership
Presence of SoM n/a 2/3 of outstanding
representing 2/3 of capital stock or
outstanding capital entire membership
stock (only with voting
rights) or entire
membership
Presence of SoM Majority of directors 2/3 of outstanding
representing 2/3 of or members present in capital stock or
outstanding capital a meeting with entire membership
stock (only with voting quorum
rights)
Presence of SoM Majority of directors 2/3 of outstanding
representing 2/3 of or members present in capital stock or
outstanding capital a meeting with entire membership
stock (only with voting quorum
rights)

Sec. 49: Regular and Special Meeting of Stockholders or Members

Codal provisions:

I. REGULAR MEETINGS:

 Shall be held annually on a dated fixed in the bylaws, or if not fixed on any date after April 15 of every year as
determined by the BODoT;
 Written notice shall be sent to all SoM at least 21 days prior to the meeting; through physical or electronic mail;
 What should be presented in the regular meeting of SoM? (AGENDA) (Not required to present all these agenda)
o Minutes of the most recent regular meeting: including description of voting and vote tabulation,
description of opportunity, matters discussed and resolutions reached, record of voting results, list of DT&O
and SoM attended, and other items.
o Members list for non-stock and stock Corp;
o Detailed, descriptive, balanced and comprehensible assessment of corporation’s performance;
o Financial Report;
o Explanation of dividend policy;
 o Directors and trustee profiles and their attendance report;
o Appraisal and performance efforts for the board;
o D&T compensation report;
o Disclosures on self-dealings and related party transactions;
o Profiles of D&T seeking re-election.
o Any other matter for inclusion in the agenda by a D&T or S&M;

II. SPECIAL MEETINGS:

 Shall be held at any time deemed necessary or as provided in bylaws;

 Written notice shall be sent to all SoM at least 1 week, or a different period as provided in the bylaws.
 What should be presented: the same as with the regular meeting;

III. NOTICES:

 May be waived expressly or impliedly by a SoM;

 General waivers of notice in AoI by Bylaws is prohibited;
 Attendance at the meeting shall constitute a waiver of notice of such meeting, except when the person attends the
meeting for the express purpose of objecting the transaction because the meeting is not lawfully called or convened;
 Intervention of SEC: there is no person authorized or the person authorized unjustly refuses to call a meeting; the SEC
may issue an order directing the petitioner stockholder or member to call for a meeting by giving proper notice.

IV. STOCK AND TRANSFER BOOK OR MEMBERSHIP BOOK:

 Shall be closed at least 20 days for regular meetings & 7 days for special meetings before the scheduled date of
meeting;

V. POSTPONEMENT:

 Written notice and reason shall be sent to all SoM of record at least 2 weeks prior to the date of meeting, or different
period as provided in the bylaws;

VI. RIGHT TO VOTE OF STOCKHOLDERS OR MEMBERS: may be exercised in: 1) Person; 2) Proxy; 3) Remote Communication
or; 4) in Absentia; as long as authorized in the bylaws;

Annotations:

 Reason for the April 15: because the corporation is expected to have prepared and submitted annual tax returns and
FS with government authorities. If fall on weekends or holidays, the meeting is to be held at the next working day.
 Effect on non-compliance or defect in the notice requirements: may be a ground for absent SoM to petition the SEC to
nullify and enjoin the implementation of the action taken during the meeting;
 Requisites on effective waiver:
o All SoM are present or duly represented at the meeting;
o Not one of them expressly states at the beginning of the meeting that the purpose of their attendance is to
object the transaction;

Sec. 50: Place and Time of Meetings of SoM

Codal Provisions:

 Place: shall be held in the principal office of the corporation set forth in the AoI; or if not practicable in the city or
municipality where the principal office is located (Manila, Cebu and Davao);
 What constitutes the Notice of Meeting:
o Time, place & purpose of the meeting;
o Agenda;
o Proxy form w/c will be submitted to the Corp Sec within the reasonable time prior to meeting;
o Requirements and procedures for attendance, participation and voting are allowed through RC and in
Absentia;
o Requirements and procedure for nomination & election of D&T;

Sec. 51: Quorum in Meetings

Codal Provisions:

 What constitutes quorum?

o Stockholders representing a majority of outstanding capital stock;
 o Majority of members; only those who are actual, living members with voting rights shall be counted in
determining the existence of the quorum.
o Exception: Unless provided in the RCC or bylaws.

Annotations:

 A meeting that is inquorate has no jurisdiction to transact business and cannot even start. Such fact of the quorum
must be ensured by the Chairman and noted in the minutes.
 Where a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of a part or
faction of those present; However, there are Exceptions:
o (1) Two persons entitled to vote upon the business to be transacted, each being a shareholder or proxy or a
duly authorized representative of corporation shall be a quorum;
o (2) If quorum is not present within 30 min or during the meeting quorum ceases to exist, meeting stand
adjourned to the same day in the next at the same time and place or such time and place as the directors may
determine;

Sec. 52: Regular and Special Meetings of Directors or Trustees

Codal Provisions:

 Majority of the D&T as stated in the AoI shall constitute a quorum to transact corporate business;
 Every decision reached by at least majority of the directors or trustees constituting a quorum (on the voting) shall be
valid as corporate act (exception: election of officers which shall require a vote of majority of the members of the
board);
 Regular meetings: shall be held once a month, unless bylaws provide otherwise;
 Special meetings: at any time upon the call of president or as provided in bylaws;
 May be held inside or outside of the Philippines unless by laws provided otherwise;
 Notice must be sent at least 2 days prior to the scheduled meeting;
 D&T who has a potential interest in any related party transaction must recuse from voting on the approval; (Conflict
of interest)

Sec. 53: Who Shall Preside the Meetings

 Chairman, or in absence, the President shall preside the meetings of D&T as well as the SoM meetings;

Sec. 54: Right to Vote of Secured Creditors and Administrators

Codal Provisions:

 Stockholder grants security interest over his/her shares in stock corp.: the stockholder-grantor shall have the right to
attend and vote the meetings of stockholders, unless the secured creditor is expressly given by the stockholder-
grantor in writing and recorded in appropriate corporate books;
 Executors, administrators and legal representative appointed by the court: may attend meetings and vote in behalf of
the SoM without the need of written proxy;

Annotations:

 Security interest: a property right in collateral that secures payment or other performance of an obligation, regardless
of whether the parties have denominated it as a security interest, & regardless of the type of asset, the status of
grantor or secured creditor or the nature of secured obligation.
 Secured creditor: does not automatically have the right to attend the meeting and vote the shares. The stockholder
must specifically grant such creditor a written proxy to attend the meeting.

Sec. 55: Voting in Case of Joint ownership of stock

Codal Provisions:

 Consent of all co-owners is necessary in voting shares of stock owned jointly by two or more persons;
o Exception: Written proxy, signed by all co-owners authorizing one of them or someone to vote such share or
shares;
o When the shares are owned in an and/or capacity: any one of the joint owners can vote said shares or appoint
a proxy therefor;

Sec. 56; Voting Right for Treasury Shares

  Treasury shares shall have no voting right as long as such shares remain in the treasury;
 Only issued and outstanding shares have voting rights; Cannot be used by incumbent board members to entrench
themselves in their positions;

Sec. 57: Manner of Voting: Proxies

Codal Provisions:

 Manner of voting: In Person; By Proxy; Remote Communication; In absentia; (authorized in the bylaws or majority of
BODoT)
 A SoM who participated through remote communication or in absentia shall be deemed present for purposes of
quorum;
 What constitutes proxy?
o Shall be in writing;
o Signed and filed by the stockholder or member in any form authorized in bylaws;
o Received by the Corp Sec within reasonable time before the scheduled meeting;
o Shall be valid only for the meeting for w/c it is intended. No proxy shall be valid and effective for a period
longer than 5 years at any one time;

Annotations:

 Controlling shareholders typically address shareholder passivity (inactiveness) by soliciting written proxy from likely
passive shareholders. Normally, proxy is in favor of the chairman of the meeting.
 Proxy: a form of agency which permits the nominee to specifically attend and vote the shares in the name of the
grantor.
 Proxy solicitation is essential in attaining a quorum at annual or special meetings. This kind of solicitation is permitted
to SEC to collect fees when the proxy will be used in relation to a disposition, acquisition, merger or consolidation.
DST is due on the proxy.

Sec. 58: Voting Trusts

VTA vs. Proxy

 Authority may be withdrawn in proxy at will; Proxy is for political right; No legal title; can be revoked anytime;
 VTA must be notarized; must be notified the corporation; Trustee acquires legal title, ownership remains with the
stockholder; Right to vote and other rights are included, except the right to receive dividends; Binding during the
entire duration of VTA;